By Christopher A. Combs

Find answers to the questions and more Hotline questions and answers addressing the following topics by clicking on the category in italics above each question. Visit AARonline for more hotline topics.

Loan Modifications

Homeowner Can Remove Personal Property Prior to Foreclosure

Q: The homeowner is delinquent on the monthly mortgage payments. A foreclosure sale is scheduled. Prior to the foreclosure sale the homeowner wants to remove the refrigerator, built-in microwave oven, and the electric stove from the home. Is the homeowner legally entitled to do so?

Loan Modifications

Homeowner Must Leave Foreclosed Home

Q: A foreclosure sale has been scheduled. On the day of the foreclosure sale an investor outbids the lender and obtains the title to the home. The investor demands that the homeowner vacate the home the next day. Must the homeowner vacate the foreclosed home the next day after the foreclosure?

Loan Modifications

Lender Must Obtain Judgement Before Garnishing Wages

Q: The homeowner cannot make their monthly payments on the home equity line of credit (“HELOC”). Can the lender garnish the homeowner’s wages or bank account after the HELOC is delinquent the first month?

Loan Modifications

Homeowner Is Personally Liable For Homeowner’s Association Fees

Q: The homeowner did not make the monthly mortgage payments and lost the home at a foreclosure sale to the lender. The home-owner also did not pay the HOA fees for the previous six months. Can the HOA sue the lender (the new owner of the home) for the delinquent HOA fees?

Loan Modifications

Investor Will Not Qualify for the Government’s Loan Modification Program

Q: An investor hired a general contractor to construct a home with the intention of selling the home after completion of the construction of the home. The investor must now begin making payments on the $800,000 construction loan because the home is completed. The investor wants to lower the payments through a loan modification and wait until the housing market improves to sell the home. Will the investor qualify for the new Home Affordable Modification Program (“Program”)?

Loan Modifications

Government’s Loan Modification Program Does Not Include Principal Reductions

Q: The homeowner cannot make the monthly mortgage payments and a foreclosure sale has been scheduled. The home is worth $100,000 less than the mortgage. If the homeowner qualifies for the Home Affordable Modification Program (“Program”), will the lender reduce the mortgage balance to the current value of the home?

Loan Modifications

Government’s Loan Modification Program Does Not Require Homeowners to Be Delinquent

Q: The homeowner is current on the adjustable mortgage loan. In two months the interest rate will adjust higher, increasing the mortgage payment by $200 per month. The homeowner will then be unable to make the increased mortgage payment. Must the homeowner be late on the mortgage payments to qualify for the Home Affordable Modification Program (“Program”)?

Loan Modifications

Homeowner May Qualify for Refinance

Q: The homeowner is current on the mortgage loan and has money in savings to continue making payments. The value of the home, however, is less than the current mortgage loan amount. Will the homeowner qualify for the Home Affordable Modification Program (“Program”)?

Loan Modifications

Listing Broker Must Disclose Loan Modification To Potential Buyers

Q: The seller and the buyer have signed a Contract with the Short Sale Addendum and they are waiting on the approval of the lender. The seller now wants to do a loan modification with this lender. If the lender agrees to the loan modification, the lender will obviously not approve the short sale and the seller will remain in the home. Does the listing broker need to inform the buyer of the seller’s attempt to do a loan modification?

Christopher A. Combs, Phoenix attorn­­­ey, is a partner with the firm of Combs Law Group, P.C., and is on the AAR Legal Hotline team.

Note: The following is for informational purposes only and is not intended as definitive legal or tax advice. You should not act upon this information without seeking independent legal counsel. If you desire legal, tax or other professional advice, please contact your attorney, tax advisor or other professional consultant.

Note: Q&As are not “black and white,” so experienced attorneys and brokers may disagree. Agents are advised to talk to their brokers/ managers when they have questions

By Christopher A. Combs

Find answers to the questions and more Hotline questions and answers addressing the following topics by clicking on the category in italics above each question. Visit AARonline for more hotline topics.

Foreclosures, REOs, & Liens

THEFT AFTER FORECLOSURE

Q: The lender foreclosed on the home and became the new owner of the home. When the previous owners of the home moved out after the foreclosure they removed all of the fixtures from the home, including vanities, sinks, toilets and light fixtures. Did the previous owners of the home commit a criminal offense by removing these fixtures after foreclosure?

Foreclosures, REOs, & Liens

BROKER CAN PAY COMMISSION ON SALE OF REO PROPERTY TO UNLICENSED BANK

Q: The broker enters into a 6% listing agreement with the bank for the sale of an REO property. After the transaction closes, the bank requests a 2% “referral fee.” Can the broker pay a 2% “referral fee” to the bank after close of escrow?

Foreclosures, REOs, & Liens

REO PROPERTY MUST USE LEAD-BASED PAINT DISCLOSURE

Q: The bank has foreclosed on a home built prior to 1978. At the foreclosure sale the bank received a trustee’s deed. The bank has now entered into a contract to sell the home, but does not want to use the lead-based paint disclosure forms. Is the bank as the seller of an REO property required to use the lead-based paint disclosure forms?

Foreclosures, REOs, & Liens

SPECIAL EXEMPTION AVAILABLE FOR OLD SUBDIVIDED LOTS

Q: The lender foreclosed on twelve homes in a subdivision, and these homes are now REO properties. The public report for the subdivision was issued four years ago. Can the lender sell these homes without a new public report?

Foreclosures, REOs, & Liens

LIMITATIONS OF ANTI-DEFICIENCY STATUTES

Q:
An owner of a four-acre lot has nearly completed the construction of the home. The mortgage lender has scheduled a trustee’s sale to foreclose on the home next week. If the mortgage lender completes the foreclosure next week, does the owner have the protection of the anti-deficiency statutes?

Foreclosures, REOs, & Liens

PURCHASE MONEY LENDER IN SECOND POSITION HAS NO CLAIM AGAINST HOMEOWNER

Q: The buyer purchased a $100,000 home with 80-20 financing. In other words, one lender made an $80,000 first purchase money loan, and another lender made a $20,000 second purchase money loan. The $80,000 first purchase money loan has foreclosed and now owns the home. Can the $20,000 second purchase money lender file a lawsuit against the owner to collect the $20,000 loan amount?

Foreclosures, REOs, & Liens

BROKER’S PROMISE TO PAY CO-BROKER COMMISSION IS ENFORCEABLE

Q: A listing broker represents an REO property. The listing broker has a listing agreement that will pay them a 6% commission. The listing broker lists the property in the MLS offering a 3% co-broke commission. A buyer makes an offer on the property. The REO seller will accept the offer but only if the listing broker reduces their commission to 4%. The listing broker agrees to the reduced commission. Can the listing broker require the buyer’s broker to split the reduced commission after the sale of the property?

Foreclosures, REOs, & Liens

COMPENSATION PAID BY BANK FOR BPOS MUST BE PAID TO REAL ESTATE AGENT’S BROKER

Q: A bank owns several REO homes. A real estate agent has agreed to furnish to the bank a Broker Price Opinion (“BPO”) on each of the homes. The real estate agent is charging a minimal fee for each of these BPOs. The goal of the real estate agent is to procure listings on some or all of these homes. Can the real estate agent directly receive compensation for these BPOs, or should the compensation for these BPOs be paid to the real estate agent’s broker?

By Christopher A. Combs

Find answers to the questions and more Hotline questions and answers addressing the following topics by clicking on the category in italics above each question. Visit AARonline for more hotline topics.

Short Sales

SELLER MUST AGREE TO LENDER’S REQUIREMENTS FOR APPROVAL OF A SHORT SALE

Q: The seller and the buyer executed a Contract with the Short Sale Addendum. The seller submitted this Contract to the lender for approval. The lender has furnished a notice of approval of the Contract, provided that the seller pay the short sale difference in monthly payments over five years. The seller now wants to cancel the Contract with the buyer. If the seller wants to cancel the Contract with the buyer because the lender’s approval requires monthly payments over five years, can the seller cancel the Contract?

Short Sales

AFTER CONTRACT WITH SHORT SALE ADDENDUM IS EXECUTED SELLER CAN ONLY ACCEPT BACK-UP OFFERS

Q: The seller and the buyer executed a Contract with the Short Sale Addendum. The lender says that it may take four weeks to determine if the lender will accept this Contract. Three days after the seller and buyer execute the Contract with the Short Sale Addendum, the seller receives an all-cash offer to close in fifteen days. Can the seller cancel the Contract with the Short Sale Addendum in order to accept the all-cash offer?

Short Sales

BUYER’S BROKER MAY NOT CONTACT SELLER’S LENDER

Q: The seller and buyer #1 execute a Contract with the Short Sale Addendum. This Contract is submitted to the lender for approval. The seller rejects an offer from Buyer #2. Can the broker for buyer #2 contact the seller’s lender directly to present buyer #2’s offer?

Short Sales

SELLER MUST SUBMIT ACCEPTED SUBSEQUENT OFFER TO LENDER

Q: The seller and buyer #1 execute a Contract with a Short Sale Addendum, and submit this Contract to the lender for approval. Two weeks later the seller and buyer #2 execute a “back up” Contract with a Short Sale Addendum for a $10,000 higher purchase price. The seller then realizes that, if the Contract with buyer #2 is sent to the lender for approval, there may be additional delay. The seller now does not want to submit the Contract from buyer #2 to the lender. Does the seller have to submit the Contract from buyer #2 to the lender?

Short Sales

SELLER CAN SUBMIT “SHORT SALE” BACKUP OFFER TO LENDER

Q: The seller and buyer execute a Contract with the Short Sale Addendum, and this Contract is sent to the lender. The seller has now accepted a back up Contract with the Short Sale Addendum at a higher price, and is planning on submitting this backup Contract to the lender. The buyer on the original Contract is objecting to the submission of this backup Contract to the lender. Can the seller accept a back up Contract and send this backup Contract to the lender?

Short Sales

BUYER’S BROKER DOES NOT HAVE TO REDUCE COMMISSION IN SHORT SALE

Q: In the MLS the listing broker offers a three per cent co-broker commission. The listing broker is the owner of the home and is not taking any commission. The lender has now approved a short sale, but demands that the co-broker’s commission be reduced to two percent. If the co-broker commission is not reduced to two percent, the lender says that they will not approve the short sale. Does the co-broker have an obligation to reduce the commission from three percent to two percent in order for the short sale to close?

Short Sales

SELLER IN SHORT SALE DOES NOT HAVE TO SUBMIT SUBSEQUENT OFFERS TO THE LENDER

Q: The seller and buyer #1 execute a Contract with the Short Sale Addendum. The Contract is submitted to the lender. Three weeks later while waiting for the lender to approve the sale to buyer #1, the seller receives an offer with the Short Sale Addendum from buyer #2. This offer from buyer #2 is $10,000 higher than the offer from buyer #1. The seller refuses to accept this higher offer because of concern about more time delay. Does the seller have an obligation to submit the higher offer from buyer #2 to the lender?

Short Sales

SELLER REQUIRED TO WAIT REASONABLE TIME FOR LENDER APPROVAL FOR SHORT SALE

Q: The seller and the buyer execute a Contract with the Short Sale Addendum. The Contract is submitted to the lender. After two weeks the lender has still not responded regarding approval of the short sale, and the seller has now received a much better offer from another buyer which will not even be a short sale and the seller will receive $5,000 proceeds at closing. This buyer will not accept a “backup”position. How long does the seller have to wait for the lender to approve the short sale to the original buyer?

Phoenix attorney Christopher A. Combs is a partner with the firm of Combs Law Group, P.C., and is on the AAR Hotline team.

By Christopher A. Combs

Find answers to the questions and more Hotline questions and answers addressing the following topics by clicking on the category in italics above each question. Visit AARonline for more hotline topics.

LANDLORD/TENANT ISSUES

TENANT’S RIGHTS IF LANDLORD IS DELINQUENT ON MORTGAGE

Q: The tenant has received notices that the landlord is behind on the monthly mortgage payments and is facing foreclosure. The tenant wants to terminate the lease now and find another rental property. Can the tenant terminate the lease if the landlord is behind on the mortgage payments and is facing foreclosure?

FORECLOSURES AND LIENS

LENDER GENERALLY HAS NO RIGHT OF POSSESSION PRIOR TO FORECLOSURE

Q: The foreclosure sale is scheduled for November 15. The owner of the home has listed the home for sale. Although the home is not occupied, the listing broker visits the home almost daily, and the home is in good condition. On September 30, the lender’s representatives force entry into the home by breaking the locks. The lender’s representatives refuse to permit the owner or the listing broker any access to the home. Is the lender allowed to forcibly take possession of the home prior to the foreclosure sale?

LANDLORD/TENANT ISSUES

TENANT NOT REQUIRED TO GIVE NOTICE OF TERMINATION OF LEASE

Q: The lease document for a one-year lease was purchased at a stationery store. When the tenant moved out of the home at the end of the one-year lease, the tenant gave no notice. The home is now vacant. The landlord is upset that the landlord had no notice that the tenant was moving out. Is a tenant required to furnish notice that the tenant will move out at the termination of the lease?

LISTINGS

“TAIL CLAUSE” STARTS AT TIME OF EARLY TERMINATION OF LISTING AGREEMENT

Q: The six-month listing agreement has a ninety-day “tail clause”. After four months the seller is unhappy with the number of showings of the seller’s home. The seller and the listing broker then agree to a mutual cancellation of the listing agreement, but do not address the ninety-day “tail clause.” Within ninety days after the mutual cancellation of the listing agreement the seller signs a contract to sell the home to a buyer who was shown the home during the first four months of the listing agreement. The seller did not list the property with a new broker. Does the ninety-day “tail clause” apply if the seller and the listing broker agree to cancel the listing agreement early?

REMEDIES

FORECLOSURE OF HOA LIENS

Q: A homeowner is seriously delinquent on their HOA monthly dues in the amount of $1,600. The HOA has now recorded a lien on the home. Can the HOA foreclose on this lien?

Christopher A. Combs, Combs Law Group, P.C.